Keywords

1 Introduction

Nowadays, both global warming and climate change are affecting human life. The main culprit of global warming is greenhouse gas (GHG), especially, carbon dioxide (CO2) emissions. These problems can be solved by using the renewable energies in an efficient and proper way [1]. Renewable energy stars playing very important role in the global energy market in the last few decades. These forms of energy are recognized as clean and cheap and very suitable for a modern life. Thereby, it has experienced rapid worldwide development in the recent decades [1] and is found to be one of the best alternatives to the fossil fuels. On the other hand, the tourism industry has rising significantly in these countries. Tourism services are recognized as important energy gluttons.

The significant rise in both, renewable energy and tourism industry has been recorded in BRICS group countries. These countries have recorded one of the highest growth rates at the world level. In the line with the economic growth, the energy consumption has also been increasing tremendously rising up the question of the sufficient energy supply. Additionally, it is important to emphasize that these countries are one of the important energy gluttons and the producers of CO2 at the global level. This was the motivation to investigate the link of interest in the case of BRICS countries (Brazil, Russia, India, China and South Africa). However, our analysis also includes Turkey. This is since the BRICS group has invited Turkey to 10th annual meeting (2018) as the term chair of the Organization of Islamic Cooperation (IOC) [2] and they signalized that Turkey can be a candidate of BRICS suggesting a new name BRICST. By joining BRICS group of the countries, Turkey may benefit very much from the cooperation.

Due to the incentives of both developed and developing countries for green energy and economy, this paper analyzes the potential link between renewable energy (REN), tourism industry (TOUR) and economic growth (GDP) in the case of BRICS+T countries. We have employed the panel VAR methodology. The rest of this paper presents a detailed literature review on the matter of interest. Moreover, we present the methodology employed together with the variables selected. The most important findings and discussion are presented in the results section while the paper ends with the concluding remarks.

2 Literature Review

Tourism industry has been recognized as industry that strongly depends on fossil fuels. Consequently, Gössling [3] describe this industry as one of the biggest emitters of CO2. This raises a great concern among policy makers on environmental depletion connected with the CO2 emissions. It is worthwhile noticing that fossils fuels based energy used by tourism sector in island states tended to have serious consequences. The evidence on the serious environmental concern connected with the tourism industry is also given by Gössling [3] in the case of 22 countries.

Despite to the serious environmental issues connected to the tourism industry, there are only a few studies providing the empirical evidence on the link between tourism industry and energy consumption [4], what was the motivation to conduct this study. In terms of Turkey, Katircioglu [5] suggests that tourism industry has increased significantly the energy consumption. Moreover, tourism industry is showed not only to increase the energy consumption but also to significantly contribute to the environmental depletion and climate change. Moreover, in the case of Cyprus, Katircioglu et al. [6] have displayed the significant impact of the arrivals of tourists on the energy consumption. These authors also provide supportive evidence to the fact that it is necessary to analyze interdependency between energy consumption, economic growth and tourism. This is since tourism industry requires significant energy sources to operate many services. Apart from this, energy is of key factors of production and thus plays a crucial role in economic growth. Thus, the increase in tourist arrivals will not only influence the energy demand but also economic growth thanks to the tourism revenue. In addition, the increase in tourist arrivals will ask for the new infrastructure and thus consequently will tend to increase the opportunities for employment.

In addition to previous paragraphs, it is of crucial importance to emphasize that the actions to protect the environment have taken an important role among tourism scholars. The reasons behind can be summarized into the two big categories: first, the tendency for tourism industry to reduce the emissions of CO2 and to transform towards the renewable sources [7] and the second is economic. Day and Cai [8] indicate that tourism industry tends to strongly influence the oil prices and consequently the economic growth and productivity. The supportive argument to the economic reason is the fact that green energy tends to be cheaper and more efficient.

Renewable energy stars playing very important role in the global energy market in the last few decades. These forms of energy are recognized as clean and cheap and very suitable for a modern life. In terms of the Brazil, strong evidence on the great potential for renewable energy is given by Pereira et al. [9]. Renewable energy is recognized as an important potential for the cooperation at the global level by Overland and Kjernet [10] in the case of Russia. Pillai and Banerjee [11] suggest that renewable energy can solve the problem of the availability of the energy caused by the exponential increase in population in India. China has been recognized as one of the biggest energy gluttons in the World and also one of the biggest producers of CO2. Thus, renewable energy is recognized as a good way to deal with these issues [12]. Due to the great potential to reduce CO2 emissions, the government of South Africa promotes strongly the renewable energy as well as the increase in energy efficiency [13]. With regards to Turkey, there is a great potential in the fields of renewable energy [14, 15].

3 Methodology and Variables

Vector autoregressive (VAR) models have been used comprehensively in last decades. One of the most important properties is they enable us to control for the heterogeneity among units of interest [16]. Moreover, these models control for the interdependencies that are dynamic while introducing the minimal number of restrictions comparing to the other models. Due to its great advantage over time-series VAR, panel VAR models have been used comprehensively in economic research. For instance, Canova and Pappa [17] have explored the convergence among the seven largest advanced economies. Moreover, it has been used in the case of Mediterranean countries by Canova and Perez Forero [18]. To estimate the VAR model we use the GMM framework.

The data used in this paper are collected from The World Bank. The motivation behind the selected period is the availability of the data. Renewable energy is approximated using the share of renewable energy in the total consumption of energy—REN [15]. TOUR (the number of tourist arrivals) is used as a proxy of tourism industry [19]. At last, GDP (GDP per capita (constant 2010 US$)) is used as a proxy of economic growth [20]. As a part of methodological framework, it is important to emphasize that we have been using three different unit-root tests and have selected the panel VAR order following the propositions of Andrews and Lu [21].

4 Results of the Research and Discussion

The empirical part starts by presenting the most important measures of the descriptive statistics. Table 1 summarizes the data for all six countries of interest as well as the total values. In terms of the tourism industry, first ranked country in terms of tourist arrivals is China on average. Second best is Russia while third best is Turkey. These countries record the values above the group mean. The least ranked country is South Africa. The standard deviation indicates significant difference in terms of tourist arrivals among the BRICS+T countries.

Table 1 Descriptive statistics
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With regards to the renewable energy, the highest percentage of renewable energy in the total consumption of energy is recorded in the case of Brazil and India respectively. The appealing fact is that these two countries are at the end of the list in terms of the tourist arrivals and are the only two countries that record the value above the group mean. The least ranked country is Russia which is quite expectable taking into account the reserves of natural gas what represents the major source of the energy supply in Russia. Thus, significant differences are reported in BRICS+T countries in the case of renewable energy consumption. At last, the economic growth varies in terms of these countries. On average, highest value is reported in the case of Brazil while the second best is Turkey. The least ranked is India. There are four countries that report the values above the group level. Those are: Brazil, Turkey, Russia and South Africa respectively. As indicated in the methodology section, this paper uses three different unit-root tests. Table 2 summarizes the obtained results.

Table 2 Unit-root tests
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These tests are applied for the variables in natural logarithmic form as well as for the first difference. With regards to the log levels, the evidence on the unit-root cannot be rejected in the case of REN and GDP. All three tests agree on the nonstationary properties of these variables. In terms of the tourism proxy variable, Im–Pesaran–Shin test and ADF—Fisher inverse chi-square suggest the non-stationary properties while Levin–Lin–Chu (LLC) t∗ test suggests the stationarity of the variables. Since most of the tests agree on the non-stationary, we have tested for the stationarity properties of the first difference. All of the three tests agree on the stationary properties of TOUR and REN for a 1% level of significance. In terms of the GDP, stationary properties are confirmed by two out of the three tests of interest, thus it is assumed to be stationary. To determine the order of the panel VAR, we have compared the values of MBIC, MAIC and MQIC for three orders. The values with the order 1 are found to be minimal, thus the first order panel VAR model will be estimated and interpreted. The first order panel VAR is estimated using the GMM model. The results are displayed in the Table 3. The results suggest a response of tourism industry to renewable energy to be significant and negative implying that BRICS+T countries are strongly dependent on the fossil fuels energy supply. Therefore, the intention to reduce the demand of fossil fuels based energy can initially have significant negative consequences on the economy. However, this impact is expected only in the short-run. These results can represent a very important insight for the decision makers to be very careful while creating the energy policies since those can have a significant consequence on the economy as a whole. The result of interest is the impact of economic growth that is not found to be significant. Thus, the exponential economic growth does not represent an attraction for tourists which can also be important insight for decision makers.

Table 3 VAR model (trivariate—GMM estimation)
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These results suggest that factors but economic growth attract tourist to visit BRICS+T countries and decision makers should do necessary changes to make these destinations more attractive for tourists. With regards to the renewable energy, none of the variables is found to have a significant impact on renewable energy. To present the potential differences between these impacts in the short- and long-run, we have calculated IRFs. This research moves on to the presentation and interpretation of the causal link between the variables of interest. Table 4 outlines the obtained results.

Table 4 Results of the Granger causality tests
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These results confirm the findings of the panel VAR suggesting a unidirectional causal link from renewable energy to tourism. Economic growth is not found to Granger cause tourism industry. However, the joint impact of these two variables is found to be significant implying that many determinants should be taken into consideration while analyzing the development of tourism industry and these determinants should be chosen very carefully. The proxy variable of tourism and economic growth were not found to have a causal impact on renewable energy. With regards to economic growth, both of the variables are found to have a causal impact on it. The joint impact of tourism industry and renewable energy on economic growth is found to be significant in the case of BRICS+T countries. Thus, it is important to consider the economic growth while displaying the link between the tourism industry and renewable energy. To test the percentage of the variability of the variables of interest explained by the other variables we have estimated the forecast-error variance decomposition (FEVD). It suggests that 2.6% of the variability of tourism is explained by REN emissions and 0.2% is explained by economic growth. The rest is explained by the variable itself. In terms of REN, tourism is found to explain 2.3% of the variability of renewable energy while GDP is found to explain 0.2%. The rest is explained by the variable itself. With regards to the third variable, tourism industry is found to explain 10.4% of the variability of economic growth while REN is found to explain 6.1%.

At last, IRF plots suggest that REN is found to react positive to the 1 standard deviation shock in economic growth in the short-run and this impact decreases in the long-run tending to reach zero. TOUR is found to react negative to the 1 standard deviation shock in economic growth in the short-run and this impact decreases in the long-run tending to reach zero. It is important to emphasize a positive reaction of GDP to the renewable energy in the short-run, but this impact decreases over the time. As indicated above, tourism industry reacts negatively to the 1 standard deviation shock in renewable energy in the short-run, but long-run impact tends to be positive. Thus, it takes a time for positive externalities from renewable energy to take place especially in emerging markets.

5 Conclusion

The potential positive link between renewable energy and tourism industry is of great importance for decision makers. It suggests the awareness of the BRICS+T countries on the necessity to take into account the environmental issues connected with the CO2 emissions as a result of fossil fuels energy consumption. These results are even more important since tourism represents an important source of economic growth. Moreover, tourism sector is found to be an important energy glutton. Thus, the introduction of green energy in tourism sector can have various positive externalities. At first, the emission of CO2 will be reduced since tourist services are based on green energy and second tourism sector can serve as a role model for the other industries to introduce green energy. Very important fact is that green energy is not only clean it is also cheap and thus firms can operate with the lower production cost what can increase their economic profit. For this purpose, government plays a key role to attract investors in the renewable energy and to create regulations that will encourage rather than discourage the development of renewable energy. In addition, the results of this paper suggest that the exponential economic growth is not considered to be the attraction for tourists, thus governments need to make a necessary effort to improve the other tourism facilities and to base it on green energy which is the first policy implications. The second policy implications includes the necessity to create small solar and wind energy projects that are cheaper and easier to establish compared to bigger once. And the last recommendation is necessity to educate the society on the benefits of renewable energy.

As of recommendations for future research, it would be interesting to include the non-renewable energy and to make the comparison between these two influences. Moreover, instead of the real GDP per capita, it would be of great importance to analyze the role of standard of living by introducing human development index (HDI). As a last recommendation, the role of foreign direct investments can be introduced especially those investments directed to the renewable energy sector.